Harvey Norman franchisee admits to misleading advertising

SYDNEY: Harvey Norman Electrical Noarlunga franchisee Peter Collins has admitted to the Australian Competition and Consumer Commission (ACCC) that representations in its promotional advertising may have misled consumers.

The ACCC said today that the admission from the South Australian store is part of court-enforceable undertakings that Lunel Pty Ltd, trading as Harvey Norman Noarlunga, has given to the ACCC.

“Lunel, which is directed by Mr Peter Anthony Collins, operates a Harvey Norman retail store franchise at Noarlunga in the southern suburbs of Adelaide,” ACCC chairman, Graeme Samuel, said today.

“During 2005 and 2006 Lunel placed advertising on several occasions in a free community newspaper circulating in the Noarlunga region. The advertising promoted price savings on various electrical brown goods and white goods such as televisions, washing machines, microwaves, and freezers.

This was done by means of price comparisons from a higher price, typically expressed as ‘not $X’, to a claimed savings price expressed as “YES $Y’.

“After a competitor complained that the ‘not $X’ prices were unrealistic and improbable, the ACCC undertook an investigation into Lunel’s advertising and raised its concerns with the company. The company believed that the ‘not $X’ price reflected its competitor’s pricing and used that basis to establish the alleged saving on those items. It admitted that the majority of such alleged savings were not based upon its own actual sales records, nor upon verifiable comparisons with competitor’s prices.

“The ACCC believed that the representations may have misled consumers in breach of sections 52 and 53(e) of the Trade Practices Act 1974. The company agreed to immediately stop the conduct.”

Within the next 30 days the company has been instructed to place a corrective advertisement in the same newspaper.
Further, to ensure that this does not happen again, the company’s director has undertaken to implement a trade practices compliance program, including training to be undertaken by management.

“Price comparisons are a very effective marketing tool,” Mr Samuel said. “This makes it all the more important that advertised price comparisons must be honest and accurate. Where comparison is made with a competitor’s pricing, this must be capable of substantiation. If the claimed saving is not genuine the business runs a serious risk of breaching the Act.

“To assist retailers, in 2005 the ACCC issued a guide to safety in price comparison advertising. This is available free from all ACCC offices and from the ACCC website,” Samuel said.